Big companies – from Jaguar Land Rover and Airbus to GlaxoSmithKline – have dominated the headlines with their warnings and preparations for Brexit, but the possibility of the UK crashing out of the EU without a deal on 29 March worries smaller firms just as much, if not more.
Britain has 5.7m small- and medium-sized enterprises – businesses with fewer than 250 employees – and concerns over a disorderly departure from the EU span many sectors.
Theresa May’s exit deal is due to go to a parliamentary vote on Tuesday. If the government is defeated, MPs will vote on successive days on whether to block a no-deal Brexit and whether to extend the departure date. Meanwhile, British SMEs try to plan for an uncertain future.
Industrial
Alex Ingham, founder and managing director of the Teesside-based MI Supplies, worries about how the workwear firm can stay competitive if a no-deal Brexit leads to new tariffs and lengthy delays at the border.
The firm imports its biggest four brands, such as Carhartt, from warehouses in Europe. It then adds corporate logos and ships the clothing and equipment to UK customers – fire brigades, construction and engineering firms – within a day.
MI Supplies has been stockpiling products but not much as it would like, after losing its biggest customer, a UK-based firm. The client cancelled a three-year contract worth £2.4m, citing increased cost pressures due to Brexit. “We are between the devil and the deep blue sea,” says Ingham.
Costs at MI Supplies have also gone up, largely due to the weak pound, by an estimated £750,000 since the EU referendum in June 2016. Ingham describes it as a “huge cost increase” for a business with a £3m annual turnover.
This has forced the firm to lay off two of its 14 employees and to reduce the remaining staff’s hours. “We’ve got so many facets to worry about, it’s hard to know where to start,” says Ingham.
Automotive and utilities
“The bigger concern for us is the free movement of labour,” says Sophie Boothroyd, finance director of the Shropshire-based Corbetts the Galvanizers.
About 90 of the 120 people working at its Halesfield site in Telford are from eastern Europe. So far only one person has left this year because of Brexit, but there could be more departures, she says.
“There haven’t been any murmurings yet of mass movement back to their native homeland, but it is certainly something we are keeping an eye on.”
The firm has raised pay rates and is considering subsidising staff travel to its factory. It plans to recruit more people locally and to take on more apprentices next year.
The 200-year-old company, which was taken over by a Canadian private equity firm two years ago, specialises in hot-dip galvanising – the coating of steel with a layer of zinc to protect it from rusting. The firm mainly supplies services to utilities companies, for buildings and oil rigs and to the transport sector for road vehicle chassis. It has an annual turnover of £12m, with profits of £500,000 last year.
Pharmaceuticals and medical devices
Brexit forced the Manchester-based Elucigene Diagnostics to register its business in Malta this week, including moving a member of staff there.
This will enable the company, which makes prenatal diagnostic kits for conditions including Down’s syndrome and also testing kits for cystic fibrosis, to continue selling its products in the EU once the UK leaves. The NHS is also a major customer of the firm.
“We’ve been trying to wait and wait and wait, but we had no other choice but to trigger our plans,” says Mark Street-Docherty, the chief executive.
While the additional cost – about £10,000 – is manageable for a business with an annual turnover of £4m, “it’s another level of complexity of bringing products into the European market”.
He says: “A lot of other firms [SMEs] are not prepared for a no-deal scenario, people genuinely didn’t expect it. The team in the office are in dismay at the fact we are now a month away from our departure from the EU, and the terms under which we will leave are unknown.”
Britain’s life sciences sector – pharmaceutical, medical technology and biotech firms and clinical research and regulatory organisations – employs 140,000 people and supports half a million jobs in total, including the supply chain.
Aerospace
Jason Aldridge, managing director at Arrowsmith Engineering, is trying to remain pragmatic about the challenges facing the aerospace sector.
“Whatever happens, we’ve got to make the best of it,” he says. “If it was a perfect world I’d prefer a deal that just works for people and business.”
The Coventry-based Arrowsmith supplies some of the 22,000 parts in the Rolls-Royce engines used on planes such as Airbus’s A380, with 70 employees producing nickel and titanium alloy components that can withstand temperatures of up to 1,200°C. The company, with annual turnover of £6.7m, has already been working flat out to take advantage of strong global demand in the aerospace industry, and to quadruple exports to growth markets.
Arrowsmith started work in December with its own suppliers to guarantee access to the parts and materials its needs even in a no-deal Brexit, from raw alloys to chemicals and drill bits. It has its own stockpile of chemicals and other suppliers have assured the business that they have got enough stock.
“We’ve looked at the next six months ahead and made sure that material is ordered, here or guaranteed,” says Aldridge.
If tariffs are imposed, Arrowsmith will have to bear the cost for its EU clients, he says. Another concern is the future for its workers from EU27 countries.
The aerospace and defence sectors employ more than 260,000 people in the UK, according to the lobby group ADS.
Construction
Brexit should be used to rebuild British manufacturing, according to John Wood, director of Canatronics, a small business that supplies lighting and timers for industrial buildings.
“I just wish the government would stop messing around,” says Wood, who backed leaving the EU in the June 2016 referendum. The business is based in the Lancashire town of Chorley.
A key supplier to Canatronics is in Germany. Wood says the strength of his company’s commercial relationships will help protect supply links, though the company is ready to use an alternative supplier from China if there are delays. The relatively small parts could be flown over at short notice if needed in the case of a no-deal Brexit.
Any significant delays on exports could be more damaging. The company, which employs five people, could cope with three weeks, but six weeks would be “a bit of a nuisance”, Wood says.
He says he has discussed the possibility of delays with clients in the Netherlands but has not been able to make any firm plans. An extension of the article 50 deadline would just prolong that uncertainty, he says, while a no-deal Brexit would be a “mess”.
“You don’t know what’s going to happen so we can’t put anything in place,” he says.
Employment in the construction industry has gone up steadily since 2014 and the sector employed 1.32 million people in 2017, according to official figures.
